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Volume 18  Number 1  •  Summer 2013
All Issues:  

Fractional Reserves and Demand Deposits
Historical Evidence from an Unregulated Banking System
By Malavika Nair
This article appeared in the Summer 2013 issue of The Independent Review

Would banks operating under laissez faire adopt a 100 percent reserve ratio or a fractional-reserve rule that would allow them to affect the money supply? The Chettiar banking system in late-nineteenth-century India functioned without any government regulation, and there is strong evidence that its bankers kept fractional reserves on interest-bearing checking deposits (explicit debt contracts that were redeemable on demand), although their ability to affect the money supply was not very large.

 PDFRead the Full Article (PDF, 12 pages)


Other Independent Review articles by Malavika Nair
    Spring 2018   The Blockchain and Increasing Cooperative Efficacy







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